Innergex Renewable Energy Inc. and the Desjardins Group Pension Plan have completed the acquisition from Hydroméga of the Sainte-Marguerite-1 run-of-river hydroelectric facility (SM-1) located in Quebec, Canada.
The transaction was closed in escrow effective on 20 June 2014 pending customary confirmatory release conditions, which are expected to be satisfied within the next few business days.
Michel Letellier, President and Chief Executive Officer of Innergex, stated:
The acquisition of the SM-1 facility provides us with both immediate contributions to cash flows and a quality hydro asset with a very high long-term value. Furthermore, we are very pleased to have developed a transaction structure that allows us to compete in acquiring renewable energy infrastructure assets at prevailing market prices, while leveraging the low capital cost and long-term horizon of a pension fund, as well as our expertise as an operator, to achieve an attractive after-tax internal rate of return for our shareholders.
All of the electricity the facility produces is covered by two fixed-price 25-year power purchase agreements with Hydro-Québec: one for 8.5 MW maturing in 2018, which provides for an annual increase in the selling price of 3% to 6%; and one for 22.0 MW maturing in 2027, which provides for an annual increase in the selling price of 2%. Both power purchase agreements contain a renewal option for an additional 25-year term.
The 30.5 MW SM-1 hydroelectric facility is located on private land near the town of Sept-Iles, in Quebec. Its long term average annual production is expected to reach 166,500 MWh after completion of a capital improvement program already underway.
The facility was commissioned in 1993 with one turbine providing an initial capacity of 8.5MW; two other turbines installed in 2002 provide additional capacity of 22.0MW. Marguerite-3 hydroelectric facility upstream results in regular production levels throughout the year.
The SM-1 facility is expected to generate annualized revenues of approximately $11.0 million and Adjusted EBITDA of approximately CAD$9.0 million.